October retail sales climb 0.5%, forecast a strong holiday shopping season

11/15/2011 1:31 pm EST

Focus: STOCKS

Jim Jubak

Founder and Editor, JubakPicks.com

Economists had projected that October U.S. retail sales would be up by 0.4%, according to a survey by Briefing.com. Numbers released by the Commerce Department this morning showed actual sales up 0.5%.

I think that’s enough to keep the optimism flowing for the end of the year holiday shopping season. And to sustain belief that the U.S. economy is stronger than anyone expected back in August. As I read these numbers, they point to GDP growth above 2% for the fourth quarter.

The big drivers were sales of consumer electronics and cars. Sales at electronics retailers climbed 3.7% in October. That’s the fastest rate of growth since November 2009. Sales at auto dealers climbed by 0.4% after an increase of 4.2% in September. That added up to a 13.2 million annual sales rate in October, the highest since February and up slightly from the 13.04 million annual rate in September.

We also had good news on the inflation front this morning as well. The producer price index, a leading indicator of inflation at the consumer level, dropped by 0.3%. That was a bigger drop than the 0.1% that economists had projected according to a survey by Bloomberg and the first decline in four months.

Now the big question for the holiday retail season is how deep the discounts will be. Too deep and the stores will be full of shoppers but retailers won't be making much money.

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